201
195) Lakey Corporation has an activity-based costing system with three activity cost pools—
Machining, Setting Up, and Other. The company’s overhead costs have already been allocated to
the cost pools and total $11,000 for the Machining cost pool, $26,200 for the Setting Up cost
pool, and $9,800 for the Other cost pool. Costs in the Machining cost pool are assigned to
products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to
products based on the number of batches. Costs in the Other cost pool are not assigned to
products. Data concerning the two products appear below:
MHs
Batches
Product S7
8,400
200
Product W3
1,600
1,800
Total
10,000
2,000
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-
based costing.
203
196) EMD Corporation manufactures two products, Product S and Product W. Product W is of
fairly recent origin, having been developed as an attempt to enter a market closely related to that
of Product W. Product W is the more complex of the two products, requiring one hour of direct
labor time per unit to manufacture compared to one-half hour of direct labor time for Product S.
Product W is produced on an automated production line.
Overhead is currently assigned to the products on the basis of direct-labor-hours. The company
estimated it would incur $500,000 in manufacturing overhead costs and produce 10,000 units of
Product W and 60,000 units of Product S during the current year. Unit cost for materials and
direct labor are:
Product S
Product W
Direct material
$
10
$
24
Direct labor
8
12
Required:
a. Compute the predetermined overhead rate under the current method of allocation and
determine the unit product cost of each product for the current year.
b. The company’s overhead costs can be attributed to four major activities. These activities and
the amount of overhead cost attributable to each for the current year are given below:
Total Activity
Activity Cost Pool
Total Cost
Product S
Product W
Machine setups required
$
200,000
800
1,200
2,000
Purchase orders issued
43,500
500
100
600
Machine-hours required
104,000
3,000
10,000
13,000
Maintenance requests issued
152,500
860
1,140
2,000
$
500,000
Using the data above and an activity-based costing approach, determine the unit product cost of
each product for the current year.
197) Boudoin Corporation manufactures two products: Product T72T and Product L34S. It is
considering implementing an activity-based costing (ABC) system that allocates all of its
manufacturing overhead to four cost pools. The following additional information is available for
the company as a whole and for Products T72T and L34S.
Activity Cost Pool
Activity Measure
Total Cost
Total Activity
Machining
Machine-hours
$345,000
15,000
MHs
Machine setups
Number of setups
$180,000
450
setups
Product design
Number of products
$94,000
2
products
General factory
Direct labor-hours
$280,000
10,000
DLHs
Activity Measure
Product T72T
Product L34S
Machine-hours
8,000
7,000
Number of setups
320
130
Number of products
1
1
Direct labor-hours
4,000
6,000
Required:
a. Using the ABC system, how much total manufacturing overhead cost would be assigned to
Product T72T?
b. Using the ABC system, what percentage of the total overhead cost is assigned to Product
L34S?
Machining
MHs
per MH
Machine setups
setups
$400
per setup
Product design
products
$47,000
per product
General factory
D LHs
per DLH
Machining
per MH
MHs
Machine setups
per setup
setups
Product design
per product
products
General factory
per DLH
DLHs
Total
198) Ciulla Corporation manufactures two products: Product J12N and Product H63J. The
company is considering implementing an activity-based costing (ABC) system that allocates all
of its manufacturing overhead to four cost pools. The following additional information is
available for the company as a whole and for Products J12N and H63J.
Activity Cost Pool
Activity Measure
Total Cost
Total Activity
Machining
Machine-hours
$315,000
15,000
MHs
Machine setups
Number of setups
$250,000
500
setups
Product design
Number of products
$42,000
2
products
General factory
Direct labor-hours
$280,000
10,000
DLHs
Activity Measure
Product J12N
Product H63J
Machine-hours
8,000
7,000
Number of setups
260
240
Number of products
1
1
Direct labor-hours
3,000
7,000
Required:
a. Using the ABC system, how much total manufacturing overhead cost would be assigned to
Product H63J?
b. Using the ABC system, what percentage of the total overhead cost is assigned to Product
J12N?
Machining
$315,000
MHs
per MH
Machine setups
$250,000
setups
per setup
Product design
products
per product
General factory
$280,000
DLHs
per DLH
Machining
per MH
MHs
Machine setups
per setup
setups
Product design
per product
products
$21,000
General factory
per DLH
DLHs
Total
199) Daston Company manufactures two products, Product F and Product G. The company
expects to produce and sell 1,600 units of Product F and 3,000 units of Product G during the
current year. Data relating to the company’s three activity cost pools are given below for the
current year:
Total Activity
Activity Cost Pools
Total Cost
Product F
Product G
Total
Machine setups
$
14,960
130
setups
90
setups
220
setups
Purchase orders
$
63,360
650
orders
1,110
orders
1,760
orders
Order size
$
32,240
1,280
hours
1,200
hours
2,480
hours
Required:
Using the activity-based costing approach, determine the overhead cost per unit for each product.
Total Cost
Total Activity
Machine setups
$
14,960
220
setups
68.00
per setup
Purchase orders
$
63,360
1,760
orders
36.00
per order
Order size
$
32,240
2,480
hours
13.00
per hour
Machine setups
$
68.00
per setup
130
setups
Purchase orders
$
36.00
per order
650
orders
23,400
Order size
$
13.00
hours
per hour
16,640
Total overhead cost
48,880
212
200) Dane Housecleaning provides housecleaning services to its clients. The company uses an
activity-based costing system for its overhead costs. The company has provided the following
data from its activity-based costing system.
Activity Cost Pool
Total Cost
Total Activity
Cleaning
$263,784
34,800 hours
Job support
145,180
7,000 jobs
Client support
4,774
220 clients
Other
170,000
Not applicable
Total
$583,738
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining
costs. One particular client, the Hoium family, requested 45 jobs during the year that required a
total of 90 hours of housecleaning. For this service, the client was charged $2,000.
Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools. Round off
all calculations to the nearest whole cent.
b. Using the activity-based costing system, compute the customer margin for the Hoium family.
Round off all calculations to the nearest whole cent.
c. Assume the company decides instead to use a traditional costing system in which ALL costs
are allocated to customers on the basis of cleaning hours. Compute the margin for the Hoium
family. (Round off all calculations to the nearest whole cent.)
214
201) Musich Corporation has an activity-based costing system with three activity cost pools—
Machining, Setting Up, and Other. The company’s overhead costs, which consist of equipment
depreciation and indirect labor, have been allocated to the cost pools already and are provided in
the table below.
Machining
Setting Up
Other
Total
Equipment depreciation
$7,200
$43,200
$21,600
$72,000
Indirect labor
1,200
1,800
3,000
6,000
Total
$8,400
$45,000
$24,600
$78,000
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and
costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs
in the Other cost pool are not assigned to products. Data concerning the two products and the
company’s costs appear below:
MHs
Batches
Product Z3
4,900
200
Product T1
5,100
800
Total
10,000
1,000
Product Z3
Product T1
Sales (total) ……………….
$208,800
$244,500
Direct materials (total) ..
$78,500
$95,400
Direct labor (total) ………
$107,800
$99,700
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-
based costing.
c. Determine the product margins for each product using activity-based costing.
216
202) The Kamienski Cleaning Brigade Company provides housecleaning services to its clients.
The company uses an activity-based costing system for its overhead costs. The company has
provided the following data from its activity-based costing system.
Activity Cost Pool
Total Cost
Total Activity
Cleaning
$
185,752
21,700
hours
Job support
$
171,532
6,100
jobs
Client support
$
15,124
760
clients
Other
$
240,000
Not applicable
Total
$
612,408
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining
costs. One particular client, the Whiddon family, requested 15 jobs during the year that required
a total of 60 hours of housecleaning. For this service, the client was charged $1,170.
Required:
a. Using the activity-based costing system, compute the customer margin for the Whiddon
family. Round off all calculations to the nearest whole cent.
b. Assume the company decides instead to use a traditional costing system in which ALL costs
are allocated to customers on the basis of cleaning hours. Compute the margin for the Whiddon
family. (Round off all calculations to the nearest whole cent.)
218
203) Greife Corporation’s activity-based costing system has three activity cost pools—Machining,
Setting Up, and Other. The company’s overhead costs have already been allocated to these cost
pools as follows:
Machining
$
41,200
Setting Up
9,000
Other
$
33,800
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and
costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs
in the Other cost pool are not assigned to products. The following table shows the machine-hours
and number of batches associated with each of the company’s two products:
MHs
Batches
Product K0
3,700
100
Product W9
16,300
1,900
Total
20,000
2,000
Additional data concerning the company’s products appears below:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-
based costing.
c. Determine the product margins for each product using activity-based costing.